QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2012

OR

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-9511

THE COAST DISTRIBUTION SYSTEM, INC.

(Exact name of Registrant as specified in its charter)

DELAWARE

94-2490990

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

350 Woodview Avenue, Morgan Hill, California

95037

(Address of principal executive offices)

(Zip Code)

(408) 782-6686

(Registrants telephone number, including area code)

Not
Applicable

(Former name, former address and former fiscal year, if changed, since last year)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90
days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every interactive
data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company. See definitions of accelerated filer, large accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.) (Check one):

Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

¨

Smaller reporting company

x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes ¨ No x

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.

The accompanying condensed consolidated balance sheet as of December 31, 2011 has been derived from our audited financial statements, contained in our Annual
Report on Form 10-K for the fiscal year ended December 31, 2011 (the 2011 10-K), which we filed with the Securities and Exchange Commission (the SEC) on March 31, 2011. The unaudited condensed consolidated financial
statements, consisting of a balance sheet as of September 30, 2012, statements of operations and statements of comprehensive earnings (loss) for the three and nine months ended September 30, 2012 and 2011 and statements of cash flows for the nine
months ended September 30, 2012 and 2011, have been prepared in accordance with accounting principles and SEC rules applicable to interim financial information. Accordingly, they do not include all of the information and footnotes required by
accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, the unaudited condensed consolidated financial statements included in this report contain all adjustments
(consisting only of normal recurring adjustments and accruals) necessary for a fair presentation of the Companys consolidated financial position as of September 30, 2012 and its consolidated results of its operations and cash flows for
the three and nine months ended September 30, 2012 and 2011. The accounting policies followed by the Company are set forth in Note A to the Companys audited financial statements included in the 2011 10-K. The unaudited interim
consolidated financial statements included in this report, and the notes that follow, should be read in conjunction with the audited consolidated financial statements and related notes included in our 2011 10-K.

The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and
assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. On an ongoing basis, we evaluate our estimates, including those related to the accounts receivable and sales allowances, and useful
lives of property and equipment, fair values of stock-based awards, income taxes, warranty liability, and other contingent liabilities, among others. We base our estimates on historical experience and on various assumptions that are believed to be
reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. However, such estimates and the assumptions on which they were based may later prove to have been incorrect due to unforeseen
changes in market or economic conditions or the occurrence of unexpected events. As a result, the carrying values of our assets and our results of operations could differ in the future from the carrying values and the results of operations that were
based on our earlier estimates and assumptions. See Managements Discussion and Analysis of Financial Condition and Results of Operations  Critical Accounting Policies and Estimates in Item 2 of Part I of this report.

2.

The Companys business is seasonal and its results of operations for the three and nine months ended September 30, 2012 are not necessarily indicative of the
results to be expected in any other interim period during, or for the full year ending, December 31, 2012. See Managements Discussion and Analysis of Financial Condition and Results of Operations  Seasonality and
Inflation in Item 2 of Part I of this Report.

3.

Basic earnings (loss) per share for each period are computed using the weighted average number of common shares outstanding during such period. Nonvested restricted
shares are excluded from outstanding shares for purposes of this calculation. Diluted earnings per share are computed using the weighted average number of common and potentially dilutive securities outstanding during the period. Potentially dilutive
securities consist of the incremental common shares issuable upon the exercise of stock options (option shares) and unvested restricted shares (using the treasury stock method). Potentially dilutive securities are excluded from the
computation of diluted earnings per share if their exercise prices are greater than the average market price of the Companys common stock or if their inclusion, in the calculation of common stock equivalents under the Treasury method, of the
unvested compensation expense attributable to the option shares or restricted shares would have been antidilutive. A total of 263,000 option shares and 317,001 restricted shares were excluded from the computation of diluted earnings per share for
the three months ended September 30, 2012, as compared to 407,000 option shares and 232,501 restricted shares for the same three months of 2011. All option shares and restricted shares were excluded from the computation of diluted earnings per
share for the nine months ended September 30, 2012, because the Company incurred a loss in that period and, as a result, the inclusion of those securities would have been anti-dilutive. For the same nine months of 2011, 373,000 option shares
and 232,501 restricted shares were excluded from the computation of diluted earnings per share.

The table which follows sets forth the manner in which diluted earnings (loss) per
common share for the three and nine month periods ended September 30, 2012 and 2011 were calculated.

Three Months EndedSeptember 30,

Nine Months EndedSeptember 30,

2012

2011

2012

2011

(In thousands)

Numerator:

Net earnings (loss)

$

307

$

612

$

(534

)

$

553

Denominator:

Weighted average shares outstanding

4,607

4,548

4,590

4,530

Dilutive effect of stock options and non-vested restricted shares

57

78



91

Denominator for diluted net earnings (loss) per share

4,664

4,626

4,590

4,621

4.

The Company leases its corporate offices, warehouse facilities and data processing equipment. Those leases are classified as operating leases as they do not meet the
required capitalization criteria. The office and warehouse leases expire over the next ten years. Minimum future rental commitments under non-cancelable operating leases are as follows:

Year Ending December 31,

(In thousands)

2012 (remaining three months)

$

963

2013

3,674

2014

3,359

2015

3,196

2016

2,707

Thereafter

1,822

$

15,721

5.

The Company has one operating segment, the distribution of replacement parts, accessories and supplies for the recreation industry. The following table sets forth the
net sales, by region, for the periods presented below:

Three Months EndedSeptember 30,

Nine Months EndedSeptember 30,

2012

2011

2012

2011

(In thousands)

USA

$

25,991

$

24,344

$

69,075

$

67,767

Canada

8,493

7,242

23,772

21,734

$

34,484

$

31,586

$

92,847

$

89,501

6.

Stock-Based Compensation.

In August 2012, our stockholders approved the 2012 Equity Incentive Plan (the 2012 Plan), which provides
for the grant of equity incentives, consisting of options, stock appreciation rights, restricted stock and restricted stock units to officers, other key employees, directors and consultants. The 2012 Plan initially set aside, for the grant of equity
incentives, 300,000 shares of the Companys common stock, plus an additional 17,666 shares which was equal to the total number of shares that were then available for the grant of new equity incentives under our then existing stockholder
approved stock incentive plans (the Previously Approved Plans). At the same time, those 17,666 shares ceased to be issuable under the Previously Approved Plans. At September 30, 2012, options to purchase a total of 433,000 shares of our
common stock and a total of 317,001 of unvested restricted shares were outstanding under the 2012 and the Previously Approved Plans. As of that same date, 319,333 shares remained available for future equity incentive grants under the 2012 Plan,
whereas no shares remained available for future equity incentive grants under the Previously Approved Plans.

The Previously
Approved Plans had provided that, if any options outstanding under any of those Plans were to expire or otherwise terminate unexercised, or if any restricted shares outstanding under any of those Plans were to be forfeited or reacquired by the
Company, the shares that had been subject to those equity incentives would have become available for the grant of new options or other equity incentives under those Plans. However, the 2012 Plan provides that those shares will, instead, cease to be
available for the grant of new equity incentives under the Previously Approved Plans and the number of shares that will be available for future equity grants under the 2012 Plan will be increased by an equal number of shares.

The fair value of each outstanding option is estimated as of the date of grant using a
binomial model. This model incorporates certain assumptions including a risk-free market interest rate, expected dividend yield of the underlying common stock, expected option life and expected volatility in the market value of the underlying common
stock.

Expected volatilities are based on the historical volatility of the Companys common stock. The risk free interest
rate is based upon market yields for United States Treasury debt securities. The expected dividend yield is based upon the Companys dividend policy and the fair market value of the Companys shares at the time of grant. Expected lives are
based on several factors, including the average holding period of outstanding options, their remaining terms and the cycle of our long range business plan.

We used the following weighted average assumptions in estimating the fair values of the options granted in the periods indicated below:

Nine Months EndedSeptember 30,

2012

2011

Stock Incentive Plans:

Expected volatility

59.0

%

72.0

%

Risk-free interest rate

1.64

%

2.15

%

Expected dividend yields

N/A

N/A

Expected lives

10 years

10 years

The weighted average grant-date fair values of options granted during the nine months ended
September 30, 2012 and 2011 were $1.28 and $1.97, respectively.

The following tables summarize stock option activity
during the nine month periods ended September 30, 2012 and 2011:

Numberof Shares

WeightedAverageExercisePrice

WeightedAverageRemaining ContractualTerm

AverageIntrisicValues

Outstanding at January 1, 2012

546,001

$

4.54

Granted

8,000

1.80

Exercised

(3,334

)

0.90

Forfeited

(117,667

)

7.90

Outstanding at September 30, 2012

433,000

$

3.60

2.3 years

$

174,000

Exercisable at September 30, 2012

425,000

$

3.64

2.4 years

$

172,000

Options vested and expected, as of September 30, 2012, to vest thereafter

433,000

$

3.60

2.3 years

$

174,000

The average intrinsic values set forth in the above table represent the total pre-tax intrinsic values
(the average of the differences between the closing stock price of the Companys common stock on September 30, 2012 and the respective exercise prices of the then outstanding in-the-money options) that would have been received by the
option holders if all of the in-the-money options had been exercised on September 30, 2012. The total pre-tax intrinsic values of options exercised during the nine months ended September 30, 2012 and 2011 were $3,500 and $21,007,
respectively.

A summary of the status of the Companys unvested options as of September 30,
2012 and changes during the nine month period ended September 30, 2012 is presented below:

Shares

WeightedAverageGrant DateFair Value

Nonvested at January 1, 2012

69,200

$

0.73

Granted

8,000

1.28

Vested

(69,200

)

0.73

Forfeited





Nonvested at September 30, 2012

8,000

$

1.28

Restricted Shares of Common Stock. During the first three months of 2010, we began granting awards
of restricted shares of common stock to some of our officers and other key management employees. Restricted shares generally vest in equal annual installments over a three or four year service period, subject to the continued employment of the
recipients of these shares. Compensation expense for such awards, which is based on the fair market value of the awards on their respective dates of grant, is recorded over those service periods.

A summary of the status of the Companys restricted share activity follows:

Shares

WeightedAverageGrant DateFair Value

Outstanding at January 1, 2012

232,501

$

4.31

Granted

147,500

2.28

Vested

(58,500

)

(4.15

)

Forfeited

(4,500

)

(4.36

)

Nonvested at September 30, 2012

317,001

$

3.39

We recognized stock-based compensation expense of $114,000 and $105,000 for the quarters ended
September 30, 2012 and 2011, respectively, and $333,000 and $330,000 for the nine months ended September 30, 2012 and 2011, respectively, as a component of selling, general and administrative expenses in our condensed consolidated
statements of operations.

Unrecognized compensation cost related to nonvested options granted under the Companys 2012
Plan and Previously Approved Plans totaled $9,000 and $24,504 as of September 30, 2012 and 2011, respectively. That cost is expected to be recognized over a weighted average period of 1.0 and 0.5 years in 2012 and 2011. At September 30,
2012 a total of 433,000 shares of our common stock were subject to outstanding stock options that were exercisable or were expected to become exercisable in the future.

Unrecognized compensation cost related to the nonvested service-conditioned restricted shares outstanding totaled approximately $700,000 and $793,000 at September 30, 2012 and 2011, respectively.
Those costs are expected to be recognized generally over weighted average periods of 1.7 and 1.6 years measured, respectively, from September 30, 2012 and September 30, 2011. All 317,001 shares of our restricted stock as of
September 30, 2012 are expected to vest. The aggregate intrinsic value of these shares of restricted stock, as of September 30, 2012 was $665,700.

7.

Warranty Reserve. We generally do not independently provide warranties on the products that we sell. Instead, in most instances, the manufacturers of the
products that we sell warrant the products and allow us to return defective products, including those that have been returned to us by our customers. However, we sell a line of portable generators under a product supply arrangement which obligates
us to provide warranty service for these products and to share the costs of providing those services with the manufacturer. We maintain a reserve for warranty claims against which the warranty costs we incur are charged. We replenish or make
additions to the reserve from time to time, based primarily on our warranty claims experience and the volume of generators we sell, by a provision we make for warranty claims, recorded as a component of costs of products sold, in the condensed
consolidated statements of income.

The following table sets forth, in thousands, the accrued warranty expense that is
included in accrued liabilities on the condensed consolidated balance sheets as of September 30, 2012 and 2011:

2012

2011

Accrued warranty balance  January 1,

$

564

$

469

Warranty costs incurred

(895

)

(528

)

Provision for warranty

1,024

538

Accrued warranty balance  September 30,

$

693

$

479

8.

Fair Value Measurement of Financial Assets and Liabilities. We apply fair value accounting for all financial assets and liabilities and non-financial
assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. We define fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities that are required to be recorded at fair value, we consider the principal or most advantageous market in which
we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions and credit risk.

GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring the fair values of
financial and non-financial assets and liabilities. These tiers consist of:

The Company had no level 3 assets or liabilities at September 30, 2012 or December 31, 2011.

We use the income approach to value derivatives, using observable Level 2 market expectations at measurement date and standard
valuation techniques to convert future amounts to a single discounted present amount, assuming that participants are motivated but not compelled to transact. Level 2 inputs are limited to quoted prices that are observable for the asset and
liabilities, which include interest rate and credit risk. We have used mid market pricing as a practical expedient for fair value measurements.

9.

Recent Accounting Pronouncements.

Changes to accounting principles generally accepted in the United States of America (U.S. GAAP) are
established by the Financial Accounting Standards Board (FASB) in the form of Accounting Standards Updates (ASUs) to the FASBs Accounting Standards Codification.

The Company considers the applicability and impact of all ASUs. Those ASUs not listed below are assessed and determined to be
either not applicable or are expected to have minimal impact on our consolidated financial position and results of operations.

Statements contained in this Report that are not historical facts or that discuss our expectations, beliefs or views regarding our future financial performance or future financial condition, or financial
or other trends in our business or in the markets in which we operate, constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and
Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. Often, they include words
such as believe, expect, anticipate, intend, plan, estimate, project, forecast or words of similar meaning, or future or conditional verbs such as
will, would, should, could, or may. Such forward-looking statements are based on current information that is available to us, and on assumptions that we make, about future events over which
we do not have control. In addition, our business and the markets in which we operate are subject to a number of risks and uncertainties. Such risks and uncertainties, and unexpected future events, could cause our financial condition or actual
operating results in the future to differ significantly from our expected financial condition or expected operating results that are set forth in the forward looking statements contained in this report and could, therefore, also affect the price
performance of our shares.

The principal risks and uncertainties to which our business is subject are discussed in
(i) Item 1A in our Annual Report on Form 10-K for our fiscal year ended December 31, 2011 (our 2011 10-K) that we filed with the Securities and Exchange Commission (the SEC) on March 30, 2012, and
(ii) in the subsection below in this Item 2 captioned Management Overview-Factors Generally Affecting Sales of RV and Boating Products. Therefore, you are urged to read not only the information contained below in this
Item 2, but also the cautionary information contained in Item 1A of our 2011 10-K, which qualify the forward looking statements contained in this report.

Due to these risks and uncertainties, you are cautioned not to place undue reliance on the forward-looking statements contained in this report and not to make predictions about our future financial
performance based solely on our historical financial performance. We also disclaim any obligation to update forward-looking statements contained in this Report or in our 2011 10-K or any other of our filings previously made with the SEC, except as
may otherwise be required by law or the rules of the American Stock Exchange.

Management Overview

We believe that we are one of the largest wholesale distributors of replacement parts, accessories and supplies for recreational vehicles
(RVs), and boats in North America. We supply more than 10,000 products and serve more than 15,000 customers throughout the United States and Canada, from 13 regional distribution centers in the United States and 4 regional distribution
centers in Canada. Our sales are made primarily to retail parts and supplies stores, service and repair establishments and new and used RV and boat dealers (Aftermarket Customers). Our sales to our Aftermarket Customers are affected
primarily by (i) the usage of RVs and boats by consumers, because such usage affects their need for and their purchases of replacement parts, repair services and supplies from our Aftermarket Customers, and (ii) sales of new RVs and boats,
because consumers often accessorize their RVs and boats at the time of purchase.

Factors Generally Affecting
Sales of RV and Boating Products

Our sales and operating results are directly affected by the extent to which consumers
purchase and use RVs and boats. Such purchases and usage, in turn, depend, in large measure, upon the extent of discretionary income available to consumers, their confidence about future economic conditions and the availability of credit that
consumers often use to finance their purchases of RVs and boats, each of which can affect the willingness or ability of consumers to use and purchase RVs and boats. As a result, recessionary conditions or a tightening in the availability or
increases in the costs of credit often lead consumers to reduce their purchases and, to a lesser extent, their usage of RVs and boats and, therefore, their purchases of the products that we sell. Additionally, increases in the prices and shortages
in the supply of gasoline can lead to declines in the usage and purchases of RVs and boats, because these conditions increase the costs of, and create difficulties for consumers in, using RVs and boats.

Weather conditions also can affect our operating results. Purchases and the usage of RVs and
boats decline in the winter months. As a result, our sales and operating results in the first and fourth calendar quarters generally are lower than in the spring and summer months in the second and third calendar quarters of the year. See
Seasonality and Inflation below. Moreover, our sales and operating results can be adversely affected if unusually severe or winter weather conditions occur during the spring or summer months, because conditions of this nature will cause
consumers to reduce their usage of RVs and boats, therefore, their purchases of the products we sell during periods when such purchases and usage ordinarily increase.

These same conditions, in turn, affect the willingness and ability of Aftermarket Customers to purchase the products that we sell. Aftermarket Customers will reduce their purchases of products from us if
consumer demand for those products declines, or Aftermarket Customers lose confidence about future economic conditions or encounter difficulties in obtaining or affording bank financing they need to fund their working capital requirements. Moreover,
during the winter, as well as any other periods of the year that may encounter unusually adverse weather conditions, Aftermarket Customers also reduce their purchases of the products we sell due to declines in the usage and purchases of RVs and
boats by consumers. By contrast, when the economy is strong and financing is readily available, and weather conditions are good, Aftermarket Customers are more willing to increase their product purchases in order to be able to meet expected
increases in consumer demand.

Overview of Operating Results for the Quarter Ended September 30, 2012

The following table sets forth certain financial data, expressed as a percentage of net sales, derived from our statements of operations
for the respective periods indicated below:

Three Months Ended September 30,

Nine Months Ended September 30,

Amounts

% Change

Amounts

% Change

2012

2011

2012 vs.2011

2012

2011

2012 vs.2011

(Dollars in thousands, except per share amounts)

Net sales

$

34,484

$

31,586

9.2

%

$

92,847

$

89,501

3.7

%

Cost of sales

28,796

25,880

11.3

%

78,141

73,595

6.2

%

Gross profit

5,688

5,706

(0.3

)%

14,706

15,906

(7.5

)%

Selling, general and administrative exp.

5,128

4,703

9.0

%

14,904

14,558

2.4

%

Operating income

560

1,003

(44.2

)%

(198

)

1,348

(114.7

)%

Other expense

162

89

82.0

%

461

490

(5.9

)%

Earnings (loss) before income taxes

398

914

(56.5

)%

(659

)

858

(176.8

)%

Income taxes provision (benefit)

91

302

(69.9

)%

(125

)

305

(141.0

)%

Net earnings (loss)

$

307

$

612

(49.8

)%

$

(534

)

$

553

(196.6

)%

Earnings (loss) per common share  Basic

$

0.07

$

0.13

(46.2

)%

$

(0.12

)

$

0.12

(200.0

)%

Earnings (loss) per common share  Diluted

$

0.07

$

0.13

(46.2

)%

$

(0.12

)

$

0.12

(200.0

)%

As indicated in the table above, our net earnings declined by $305,000 or 49.8%, to $307,000, or $0.07
per diluted share, in this years third quarter from approximately $612,000, or $0.13 per diluted share, in the third quarter of 2011. In the nine months ended September 30, 2012, we incurred a net loss of $534,000, or ($0.12) per diluted
share, as compared to net earnings of $553,000, or $0.12 per diluted share, in the first nine months of 2011.

The decline in
our net earnings in this years third quarter and the loss incurred in the first nine months of this year were due primarily to a decline in our gross profits and an increase in our selling, general and administrative expenses in each of those
periods. The declines in gross profits were primarily attributable to (i) selected price reductions which we made in response to aggressive price competition in our markets, (ii) a weakening of the Canadian dollar, as compared to the U.S.
dollar, in 2012, which increased the costs to our Canadian subsidiary of purchasing products from suppliers in the United States, (iii) an increase in shipping costs, and (iv) an increase in costs associated with quality control testing of
new models of portable generators we introduced into the market, and increases in the warranty reserve for our proprietary products. The increases in selling, general and administrative expenses were due largely to increased marketing and
promotion costs for our propriety products.

In accordance with accounting principles generally accepted in the United States of America (GAAP), we record most of our
assets at the lower of cost or fair value. In the case of some of our assets, principally accounts receivable, inventories and deferred income taxes, we make adjustments to their cost or fair values to arrive at what we expect to be able to collect
on outstanding accounts receivables, the amounts for which we expect to be able to sell our inventories and the amount of available tax loss and credit carryforwards and deductions that we will be able to use to reduce our future income tax
liability. Those adjustments are made on the basis of estimates which require us to make assumptions and judgments regarding economic and market conditions and trends and their impact on our financial performance. However, those assumptions and
judgments are necessarily based on current information available to us. If those conditions or trends were to change in ways that we did not expect, or other unexpected events were to occur, then, pursuant to GAAP, we may be required to further
adjust the carrying values at which we record these assets for financial reporting purposes. Any resulting downward adjustments are commonly referred to as write-downs of the assets affected by the changed conditions.

It is our practice to establish reserves or allowances against which we are able to charge any such downward adjustments or
write-downs to these assets. Examples include an allowance established for uncollectible accounts receivable (sometimes referred to as bad debt reserves), an allowance for inventory obsolescence, a reserve for product
warranty claims and a valuation allowance against our deferred tax asset to the extent necessary to reduce its carrying value to the amount of that asset that we believe we are likely to be able to use to reduce our income tax liability in future
periods. The amounts at which those allowances or reserves are established and maintained involve estimates that are based on our historical experience and also on our assumptions and judgments about economic or market conditions or trends and any
other factors that could affect the values at which we had recorded such assets. We periodically increase or replenish the allowances following write-downs of uncollectible accounts or to take account of increased risks due to changes in economic or
market conditions or trends. Increases in the allowances are effectuated by charges to income or increases in expense in the periods when those allowances are increased. As a result, our judgments or assumptions about market and economic conditions
or trends and about their effects on our financial performance can and will affect not only the amounts at which we record these assets on our balance sheet, but also our results of operations.

The decisions as to the timing of (i) adjustments or write-downs of this nature and (ii) the increases we make to our
allowances or reserves, also require subjective evaluations or assessments about the effects and duration of changes in economic or market conditions or trends. For example, it is difficult to predict whether events or changes in economic or market
conditions, such as increasing gasoline prices or interest rates or economic downturns, will be of short or long-term duration, and it is not uncommon for it to take some time after the onset of such changes for their full effects on our business to
be recognized. Therefore, we make such estimates based upon the information available to us at that time and reevaluate and adjust the reserves and allowances for potential write-downs on a quarterly basis.

Under GAAP, most businesses also must make estimates or judgments regarding the periods during which sales are recorded and also the
amounts at which they are recorded. Those estimates and judgments will depend on such factors as the steps or actions that a business must take to complete a sale of products to or to perform services for a customer and the circumstances under which
a customer would be entitled to return the products or reject or adjust the payment for the services rendered to it. Additionally, in the case of a business that grants its customers contractual rights to return products sold to them, GAAP requires
that a reserve or allowance be established for product returns by means of a reduction in the amount at which its sales are recorded, based primarily on the nature, extensiveness and duration of those rights and historical return experience.

In making our estimates and assumptions we follow GAAP and accounting practices applicable to our business that we believe
will enable us to make fair and consistent estimates of the carrying value of those assets and to establish adequate reserves or allowances for downward adjustments in those values that we may have to make in future periods.

Set forth below is a summary of the accounting policies that we believe are material to an understanding of our financial condition and
results of operations that are discussed below.

Revenue Recognition and the Allowance for Product Returns. We
recognize revenue from the sale of a product upon its shipment to the customer. Shipping and handling costs that are billed to our customers are included in revenue and our shipping and handling costs are included in costs of sales. We provide our
customers with limited rights to return products that we sell to them. We establish an allowance for potential returns that reduces the amounts of our reported sales. We estimate the allowance based on historical experience with returns of like
products and current economic and market conditions and trends, which can affect the level at which customers submit product for return.

Accounts Receivable and the Allowance for Doubtful Accounts. In the normal course of our business we extend 30 day payment terms to our customers and, due to the seasonality of our business,
during late fall and winter we sometimes grant payment terms of longer duration to those of our customers that have good credit records. We regularly review our customers accounts and estimate the amount of, and establish an allowance for,
uncollectible accounts receivable in each reporting period. The amount of the allowance is based on several factors, including the age of unpaid amounts, a review of significant past due accounts and current economic and market trends that can
affect the ability of customers to keep their accounts current. Estimates of uncollectible amounts are reviewed periodically to determine if the allowance should be increased, and any increases are recorded in the accounting period in which the
events or circumstances that require such increases become known. For example, if the financial condition of some of our customers or economic or market conditions were to deteriorate, adversely affecting the ability of customers to make payments to
us on a timely basis, it could become necessary for us to increase the allowance for uncollectible accounts. Since the allowance is increased or replenished by recording a charge which is included in, and has the effect of increasing, selling,
general and administrative expenses, an increase in the allowance will reduce income in the period when the increase is recorded.

Inventory and Reserve for Excess, Slow-Moving and Obsolete Inventory. We are a wholesale distributor and not a manufacturer of products and, therefore, all of our inventory consists of
finished goods. Inventories are valued at the lower of cost (first-in, first-out) or net realizable value and that value is reduced by an allowance for excess and slowing-moving or obsolete inventories. The amount of the allowance is determined on
the basis of historical experience with different product lines and estimates or assumptions concerning future economic and market conditions and trends. If there is an economic downturn or a decline in sales, causing inventories of some product
lines to accumulate, it may become necessary for us to increase the allowance. Other factors that can require increases in the allowance or inventory write downs are reductions in pricing or introduction of new or competitive products by
manufacturers; however, due to the relative maturity of the markets in which we operate, usually these are not significant factors. Increases in this allowance also will cause a decline in operating results as such increases are effectuated by
charges against income. Our reserve for excess and obsolete inventory was $1,383,000, or approximately 4.5% of gross inventory, at September 30, 2012, as compared to $1,380,000 or approximately 4.9% of gross inventory at September 30,
2011.

Deferred Tax Asset and Valuation Allowance. We record as a deferred tax asset on our balance
sheet an amount equal to the tax credit and tax loss carryforwards and tax deductions (tax benefits) that we believe will be available to us to offset or reduce the amounts of our income taxes in future periods. Under applicable federal
and state income tax laws and regulations, such tax benefits will expire if not used within specified periods of time. Accordingly, the ability to fully use our deferred tax asset depends on the amount of taxable income that we generate during those
time periods. At least once each year, we make estimates of future taxable income that we believe we are likely to generate during those future periods. If we conclude, on the basis of those estimates and the aggregate amount of the tax benefits
available to us, that it is more likely, than not, that we will be able to fully utilize those tax benefits to reduce our taxes prior to their expiration, we recognize the deferred tax asset in full on our balance sheet. On the other hand, if we
conclude on the basis of those estimates and the aggregate amount of the tax benefits available to us that it is more likely than not, that we will be unable to utilize those tax benefits in their entirety prior to their expiration, then we would
establish (or increase any existing) valuation allowance to reduce the deferred tax asset on our balance sheet to the amount that we believe we will be able to utilize. That reduction would be implemented by recognizing a non-cash charge that would
have the effect of increasing the provision, or reducing any credit, for income taxes that would be recorded in our statement of operations. The aggregate amount of our net deferred tax asset was approximately $2.9 million both at
September 30, 2012 and September 30, 2011.

Long-Lived Assets. Long-lived assets are reviewed for possible impairment at
least annually or if and when events or changes in circumstances indicate the carrying amount of any of those assets may not be recoverable in full, by comparing the fair value of the long-lived asset to its carrying amount.

Foreign Currency Translation. The financial position and results of operations of our Canadian and other foreign
subsidiaries are measured using local currency as the functional currency. Assets and liabilities of each foreign subsidiary are translated into U.S. dollars at the rate of exchange in effect at the end of each reporting period. Revenues and
expenses are translated into U.S. dollars at the average exchange rate for the reporting period. Foreign currency translation gains and losses not impacting cash flows are credited to or charged against other comprehensive earnings. Foreign currency
translation gains and losses arising from cash transactions are credited to or charged against current earnings.

Stock-Based Compensation. We account for stock-based compensation in accordance with ASC 718, Stock Compensation,
which requires the recognition of the fair value of compensation paid in stock or other equity instruments as an expense in the calculation of net earnings (loss). We recognize stock-based compensation expense in the period in which the employee is
required to provide service, which is generally over the vesting period of the individual equity instruments. Stock options and restricted shares issued to employees and directors for services performed are recorded at their respective fair values
at the time they are issued and are expensed as service is provided. Stock-based compensation expense for the quarters ended September 30, 2012 and 2011, totaled $114,000 and $105,000, respectively, and $333,000 and $330,000 for the nine months
ended September 30, 2012 and 2011, respectively.

Results of Operations

Net Sales

Net sales consist of revenues from the sales of the products we supply or distribute, net of an allowance for product returns. The
following table sets forth and compares our net sales (in thousands of dollars) for the nine months ended September 30, 2012 and 2011:

Three Months Ended
September 30,

Nine Months Ended September 30,

Amounts

%Change

Amounts

%Change

2012

2011

2012 vs. 2011

2012

2011

2012 vs. 2011

(Unaudited)

$ 34,484

$ 31,586

9.2

%

$ 92,847

$ 89,501

3.7

%

The increases in net sales during the three and nine months ended September 30, 2012 were primarily
attributable to increased sales of generators and other RV products to large mass merchandisers, a new distribution channel for us. Those sales more than offset continuing weakness in the demand for RV and boating parts, accessories and supplies due
to the continued weakness of the economic recovery in the United States.

Gross Profit

Gross profit is calculated by subtracting the cost of products sold from net sales. Cost of products sold consists primarily of the
amounts paid to manufacturers and suppliers for the products that we purchase for resale, and warehouse and distribution costs, including warehouse labor costs and freight charges. Gross margin is gross profits stated as a percentage of net sales.

The following table compares our gross profits and gross margin in the three and nine months ended September 30, 2012
and 2011.

The declines in our gross profits and our gross margin in the three and nine months ended
September 30, 2012, as compared to the same respective periods of 2011, were primarily due to (i) selected price reductions we made in response to aggressive price competition by competitors seeking to increase their sales in the face of
weak consumer demand in the RV and boating markets, (ii) a weakening of the Canadian dollar, as compared to the U.S. dollar, in 2012, which increased the costs to our Canadian subsidiary of purchasing products from suppliers in the United
States, (iii) increased shipping costs, and (iv) an increase in costs associated with quality control testing of new models of portable generators we began introducing into the market, and an increase in warranty reserves for our
proprietary products primarily in response to an increase in sales of those products.

Selling, General and Administrative
Expenses

Three Months EndedSeptember 30,

Nine Months EndedSeptember 30,

2012

2011

2012

2011

(In thousands)

Selling, general and administrative expenses

$

5,128

$

4,703

$

14,904

$

14,558

As a percentage of net sales

14.9

%

14.9

%

16.1

%

16.3

%

As the above table indicates, selling, general and administrative (SG&A) expenses
increased by $425,000, or 9.0%, in the quarter ended September 30, 2012, as compared to the same quarter of 2011. As a percentage of sales, those expenses remained stable at 14.9% for both of those periods. For the nine months ended
September 30, 2012, SG&A expenses increased by $346,000, or 2.4%, to $14,904,000 from $14,558,000 in 2011. As a percentage of net sales, SG&A expenses decreased to 16.1% in the nine months ended September 30, 2012 from 16.3% for
the same nine months of 2011.The increases in SG&A expenses were due largely to increased marketing and promotional costs for our proprietary products in the second and third quarters of 2012, as compared to the same respective periods of 2011.

Other Expense

The largest component of other expense is the interest expense that we incur on borrowings. Other (income) expense also includes foreign currency gains or losses and gains or losses on disposal of assets.

Three Months EndedSeptember 30,

Nine Months EndedSeptember 30,

2012

2011

2012

2011

(In thousands)

Other Expense

Interest expense

$

127

$

128

$

415

$

427

Other

35

(39

)

46

63

Total

$

162

$

89

$

461

$

490

As a percentage of net sales

0.5

%

0.3

%

0.5

%

0.6

%

Income Taxes

Three Months EndedSeptember 30,

Nine Months
EndedSeptember 30,

2012

2011

2012

2011

(In thousands)

Income tax provision (benefit)

$

91

$

302

$

(125

)

$

305

Effective tax rate

22.9

%

33.0

%

(19.0

%)

35.5

%

Our effective tax rate is affected by the amount of our expenses that are not deductible for income tax
purposes and by varying tax rates on income generated by our foreign subsidiaries.

Financial Condition, Liquidity and Capital Resources

We finance our working capital requirements for our operations primarily with borrowings under a long-term revolving bank
line of credit, and internally generated funds.

Our revolving bank line of credit agreement permits us to borrow up to the lesser of
(i) $24,000,000, or (ii) an amount equal to 85% of the value of our eligible accounts receivable and up to 55% of the value of our eligible inventory. Our borrowing base under our revolving credit line was $16.9 million at
September 30, 2012, as compared to $16.4 million at September 30, 2011. Our outstanding revolving credit line borrowings totaled approximately $11.7 million at September 30, 2012, as compared to $10.9 million at September 30,
2011. Interest is payable at the banks prime rate (3.25% at September 30, 2012) plus 1.50% or, at the Companys option but subject to certain limitations, at the banks LIBOR rate (.22% at September 30, 2012) plus 3.00%.
The maturity date of the revolving bank line of credit is July 10, 2014.

The revolving bank line of credit agreement, as
amended, contains a single financial covenant, which requires us to achieve a fixed charge coverage ratio of at least 1.10 to 1.0 for successive rolling 12 month periods ending on the last day of each fiscal quarter, commencing with the 12 month
period ending December 31, 2012. Until that covenant is satisfied, the interest rate on our borrowings will be at LIBOR plus 3.25%, an increase of 0.25%, as compared to the interest rate that was in effect in 2011.

Cash Used in Operations. We generally use cash for, rather than generate cash from, operations in the first part of the year,
because we build inventories, and accounts receivables increase, as our customers begin increasing their product purchases prior to and in anticipation of the spring and summer selling seasons See Seasonality and Inflation below.

During the nine months ended September 30, 2012, we used $62,000 of cash in our operations, primarily to fund $4.8
million of inventories, which was largely offset by reductions of $1.9 million and $300,000 of accounts receivable and other currents assets, respectively, and increases of $1.8 million and $300,000 in accounts payable and accrued liabilities and
non-cash expenses of $800,000, respectively. By comparison, in the nine months ended September 30, 2011, we generated $1.1 million of cash from our operations, primarily attributable to net earnings of $600,000, non-cash expenses of $900,000,
and decreases in accounts receivable and other currents assets of $1.0 million and $900,000, respectively, partially offset by a $2.3 million increase in inventories. At September 30, 2012, inventories totaled $30.7 million, accounts
receivable totaled $9.0 million, and accounts payable totaled $5.2 million, respectively, as compared to $28.2 million, $8.9 million, and $3.3 million, respectively, at September 30, 2011.

Net Cash Used in Investing Activities. In the nine months ended September 30, 2012, we used net cash of $415,000 in investing
activities, consisting of $288,000 of capital expenditures, primarily for purchases of computer and office equipment, and $145,000 of increases in other assets. By comparison, we used $233,000 in investing activities in the first nine months of
2011, consisting of capital expenditures of $270,000, partially offset by $19,000 from sales of equipment and a $18,000 decrease in other assets.

Net Cash Provided by Financing Activities. Cash provided by financing activities consists primarily of cash from our bank credit line borrowings. We obtained borrowings, net of repayments under
that credit line of $800,000, in each of the nine month periods ended September 30, 2012 and 2011.

We lease the majority of
our facilities and certain of our equipment under non-cancelable operating leases. Our future lease commitments are described in Note 4 of Notes to our Condensed Consolidated Financial Statements included elsewhere in this report. The following
table sets forth, by maturity dates, the total of our contractual obligations, in thousands of dollars, as of September 30, 2012:

Contractual Obligations at September 30, 2012:

Total

Less thanOne Year

One toThree Years

Four toFive Years

More thanFive Years

Long-term debt obligations

$

11,733

$



$

11,733

$



$



Operating lease obligations

15,721

963

7,033

5,903

1,822

Total

$

27,454

$

963

$

18,766

$

5,903

$

1,822

Our long term debt obligations consist of borrowings under our long term revolving bank credit facility.
It is not possible to calculate future estimated interest payments on those borrowings predictably, because the amounts of such borrowings fluctuate throughout the year depending on our liquidity needs, which can vary widely primarily due to the
seasonality of our business and the effects of prevailing economic conditions on the demand for and the purchases of our products by customers. Also, the interest rate on those borrowings is determined by reference to the banks prime rate or
LIBOR, which also can and often do fluctuate during the year. Additionally, the formulas for determining the

specific interest rate that will apply to such borrowings can change from year to year. Set forth above, under the caption Financial Condition, Liquidity and Capital Resources are the
formulas for determining the interest rates that applied to those borrowings during the first nine months of 2012.

Expected Uses and Sources of Funds. We expect our principal uses for cash in the year ending December 31, 2012 will be to
fund operations and capital expenditures and we anticipate that we will be able to fund those cash requirements in 2012 with borrowings under our revolving credit facility and internally generated funds.

We will continue to explore opportunities to increase our sales and our market shares and to improve our profit margins. We plan to
establish new product supply relationships, including relationships that enable us to increase the products that we source from lower cost, but high quality, overseas suppliers, including product suppliers in China and other countries in the Far
East, and in Canada, Europe and the United States, and to invest in tooling needed for such products. As a result, we may have occasion in the future to use internally generated funds or bank borrowings for these purposes as well.

Seasonality and Inflation

Seasonality. Sales of recreational vehicle and boating parts, supplies and accessories are seasonal. We generate significantly
higher sales during the six-month period from March through August, when usage of RVs and boats are at their peak, than we do during the remainder of the year when weather conditions are not optimal for outdoor activities. Because a substantial
portion of our expenses are fixed, operating income declines and we may incur losses and must rely more heavily on borrowings to fund operating requirements during the period from September through February when our sales are lower.

Inflation. Generally, we have been able to pass inflationary price increases on to our customers. However, inflation also may
cause or may be accompanied by increases in gasoline prices and interest rates. Such increases, or even the prospect of increases in the price or shortages in the supply of gasoline, can adversely affect the purchase and usage of RVs and boats,
which can result in a decline in the demand for our products.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our exposure to market risk with respect to financial instruments is primarily related to changes in interest rates with respect to borrowing activities, which may adversely affect our financial position,
results of operations and cash flows. In seeking to minimize the risks from interest rate fluctuations, we manage exposures through our regular operating and financing activities. The fair value of borrowings under our revolving credit facility
approximates the carrying value of such obligations. As of September 30, 2012, outstanding borrowings under our bank revolving line of credit totaled approximately $11.7 million.

We have substantial sales operations in Canada and as a result, our earnings, cash flows and financial position can be affected by
movements in the Canadian dollar exchange rate. Consequently, we are exposed to market risk from foreign currency fluctuations associated with our Canadian operations and our Canadian currency denominated debt. Therefore, from time to time, we may
hedge the net investment of our foreign operations in Canada by purchasing foreign exchange derivatives, such as purchased put option contracts, to mitigate the risk of changes in the value of our net investment in our Canadian subsidiary that can
occur as a result of changes in currency exchange rates. As of September 30, 2012 we held no foreign currency derivatives. We do not use financial instruments for trading or other speculative purposes.

ITEM 4T.

CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under
the Securities Exchange Act of 1934, as amended (the Exchange Act) is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and
communicated to management, including our CEO and CFO, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognized that any system of controls and procedures,
no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.

In accordance with SEC rules, an evaluation was performed under the supervision and with the
participation of our Chief Executive Officer and Chief Financial Officer of the effectiveness, as of September 30, 2012, of the Companys disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act. Based on
that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2012, the Companys disclosure controls and procedures were effective to provide reasonable assurance that information required to
be disclosed in our reports that we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms and that such information is accumulated and communicated to
management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

There was no change in our internal control over financial reporting that occurred during the quarter ended September 30, 2012 that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.

PART IIOTHER INFORMATION

ITEM 1A.

RISK FACTORS

There have
been no material changes in the risk factors that were disclosed in Item 1A, under the caption Risk Factors in Part I of our Annual Report on Form 10-K for our fiscal year ended December 31, 2011.

ITEM 5.

OTHER INFORMATION

As
discussed above in the subsection of Managements Discussion and Analysis of Financial Condition entitled Financial Condition, Liquidity and Capital Resources  in Part I of this report, the Company finances a substantial
portion of its working capital requirements with borrowings under a long-term revolving bank line of credit, pursuant to that certain Third Amended and Restated Loan and Security Agreement, as amended (the Credit Line Agreement) entered
into by the Company with Bank of America N. A., as lender (the Bank).

The Credit Line Agreement contains a single
financial covenant which requires the Company to achieve a fixed charge coverage ratio of at least 1.10to-1.0 for successive rolling 12 month periods ending on the last day of each fiscal quarter. The first of those rolling 12-month periods to
which the covenant was to have been applicable was the 12 month period ended September 30, 2012.

On November 9, 2012 the
Company and the Bank entered into the 13th Amendment to the Credit Line Agreement (the 13th Amendment), which provides, instead, that the first of those rolling 12-month periods to which that financial covenant will apply will be the 12
month period ending December 31, 2012. The 13th Amendment also requires the Company to provide the Bank with additional information, on a weekly basis, regarding the determinations of the Companys borrowing base and the amount of
borrowing availability under the credit line.

The foregoing summary of the 13th Amendment is not intended to be complete and is qualified in
its entirety by reference to that Amendment, a copy of which is attached as Exhibit 10.99 to, and by this reference is incorporated into, this Quarterly Report on Form 10-Q.

ITEM 6.

EXHIBITS

(a)
Exhibits.

Exhibit No.

Description of Exhibit

10.99

Thirteenth Amendment to Third Amended & Restated Loan and Security Agreement between the Company and Bank of America, N. A.

31.1

Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification of Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*

XBRL Instance Document

101.SCH*

XBRL Taxonomy Extension Schema Document

101.CAL*

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*

XBRL Taxonomy Extension Definitions Linkbase Document

101.LAB*

XBRL Taxonomy Extension Label Linkbase Document

101.PRE*

XBRL Taxonomy Extension Presentation Linkbase Document

X*

Attached as Exhibit 101 to this report are the following financial statements from our Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 formatted in XBRL:
(i) the unaudited Consolidated Balance Sheets, (ii) the unaudited Consolidated Statements of Operations, (iii) the unaudited Consolidated Statements of Cash Flows, and (iv) related notes to these financial statements. Such exhibits are deemed
furnished and not filed pursuant to Rule 406T of Regulations S-T.

Thirteenth Amendment to Third Amended & Restated Loan and Security Agreement between the Company and Bank of America, N. A.

31.1

Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification of Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*

XBRL Instance Document

101.SCH*

XBRL Taxonomy Exntension Schema Document

101.CAL*

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*

XBRL Taxonomy Extension Definitions Linkbase Document

101.LAB*

XBRL Taxonomy Extension Label Linkbase Document

101.PRE*

XBRL Taxonomy Extension Presentation Linkbase Document

X*

Attached as Exhibit 101 to this report are the following financial statements from our Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 formatted in XBRL:
(i) the Unaudited Consolidated Balance Sheets, (ii) the Unaudited Consolidated Statements of Operations, (iii) the Unaudited Consolidated Statements of Cash Flows, and (iv) related notes to these financial statements. Such exhibits are deemed
furnished and not filed pursuant to Rule 406T of Regulations S-T.